Checking to see if I understand Whole-selling

2 Replies

I read an article about transactional funding (copied and pasted below) I wanted to make sure I I comprehend everything, and I really want to break it down to its molecules. That's the only way I'm going to get this.

let's see if I can understand the steps.

1. Mary secures a house for $200,000.

2. Enrique, the money lender, loans Mary $200,000.

3. Now with that money, Mary buys the house for 200k. She secures it under contract (and I have to know what that contract entails, and how to write it up).  At the moment she has $0 and the house is hers.

4. John, the investor, pays Mary $250,000, and Mary signs the house over to John. John now owns the house, is out $250,000 at the moment, and spends $30,000 more on repairs. He has now spent $280,000 on both the purchase of the house, and on the repairs.

5. Mary has $250,000.  She owes Enrique the Lender $200,000 plus (let's say) 15% interest. 15% interest of $200,000 is: (200,000 X .15) 30,000.  So Mary owes a total of $230,000 to Enrique.

6. Enrique the lender makes $30,000 from loaning to Mary. Mary makes $20,000 from selling the house contract to John. John makes a whopping $120,000 because he sold his freshly rehabbed house for $400,000 which covers the cost of buying the house, and fixing it up.


1. Why couldn't John just buy the house for $200,000 in the first place and cut Mary out altogether?

2. If Mary discloses too much information (where the house is, how much she is buying it for, etc.) can John sneak in, buy the place for $200,000 and cut Mary out altogether?

3. What information should Mary disclose to John?  What information should she NOT disclose to John?  Basically, I'm asking how the middle man can protect him/herself from being cut out?

4. What if John chooses NOT to buy the house from Mary (Sorry, kid, I found a better deal)?  What does she do then?  How will she pay back Enrique?  I had read something about "contingency," but how does that work?


Transactional funding allows a wholesaler the opportunity to purchase a property with none of the wholesaler's funds, provided that there is already an investor in place to purchase the property from the wholesaler within a short time frame of 2-5 days.

For instance, Mary (wholesaler) has secured a property at 200k, and already has John (a cash buyer/investor) for 250k. John is confident that after 30k in repairs/rehab, he will be able to sell it for 400k. So Mary opens escrow, and upon Enrique (a transactional funding lender) doing due his diligence, Enrique will fund Mary's purchase of the property including closing costs.

Transactional funding has also been used lately for longer term deals, in which the end buyer is financing their transaction. The length of the term can range from 30-120 days. In this situation, if an investor has secured a property and already has an end user in place, the investor will not necessarily have to provide any funds in order to close their purchase of the property.

For instance, Frank (an investor) has secured a property for 210k, and Frank already has and end user for the retail value of the property at 300k. The end user's name is Jeff. Jeff is qualified and approved for a loan for 300k, so Frank is confident that he has a great deal. Frank goes to Enrique (a transactional lender) for an extended/delayed transactional funding. Enrique provides 210k plus closing costs, and allows 30 days or more for Jeff to close his loan to purchase the property at 300k.

Transactional Funding is related to or also known as funding back to back closes, flash funding, double closes, simultaneous closes, double escrows.

Enrique Barrios, 818-915-2543 ph, Transactional Funding Lender, Hard Money Lender, Real Estate Investor, Los Angeles, CA.

I'm new to this but I think I know the answers to some of your questions.  

1. Mary has a purchase agreement with the seller under contract, I'm sure he could cut he out if he waited until the contract was up and Mary hadn't found another buyer.

2.  While not always possible and business can be a cut throat game, I think you can protect yourself by doing business with investor buyers that have a good reputation, I'm sure word about John's underhanded ways would spread eventually.

4.  I think you pay a fee if you can't secure a buyer like $500 or something.

ok you can get transactional funding to do a double close(or called a simultaneous close) but if that trans funder charged 15% is find another lender. You need to find yourself a investor friendly title company or attorney depending on your state. You need to go interview them and tell them what you are trying too do. Ask them if they allow double closes where you close with your end buyer first and use that money to close with the seller. Some might not do that and then you would need transactional funding. 

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